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Balance Sheet and Value

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Learning Goal 6:
Explain the relationships among financial decisions, return, risk, and the firm's value.

1)
Any action taken by the financial manager that increases risk will also increase the required return. True or False 2)
In common stock valuation, any action taken by the financial manager that increases risk will cause an increase the required return. True or False 3)
In common stock valuation, any action taken by the financial manager that increases risk will cause an increase in value. True or False 4)
An action on the part of a firm that increases the level of expected cash flows without a corresponding increase in risk should reduce share value; An action that reduces the level of expected cash flows without a …show more content…

True or False 6)
The book value per share of common stock is the amount per share of common stock that would be received if all of the firm's assets were sold for their accounting value and the proceeds remaining were divided among common stockholders. True or False 7)
________ is the value of the firm's ownership in the event that all assets are sold for their exact accounting value and the proceeds remaining after paying all liabilities (including preferred stock) are divided among common stockholders. A)
Liquidation value B)
Book value C)
The P/E multiple D)
The present value of the common stock 8)
________ is the actual amount each common stockholder would expect to receive if the firm's assets are sold, creditors and preferred stockholders are repaid, and any remaining money is divided among the common stockholders. A)
Liquidation value B)
Book value C)
The P/E multiple D)
The present value of the dividends 9)
________ is a guide to the firm's value if it is assumed that investors value the earnings of a given firm in the same way they do the average firm in the industry. A)
Liquidation value B)
Book value C)
The P/E multiple D)
The

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